Champions - Real Estate Finance Exam
(2025) || Questions & Answers (Graded A+)
Character - ANSWER - A measure of the willingness of a borrower to make on-time
payments. Credit character is revealed in the borrower's credit report.
Capacity - ANSWER - A measure of the willingness of a borrower to make on-time
payments. Credit character is revealed in the borrower's credit report.
Capital - ANSWER - The sum of all assets that the borrower has accumulated. Saving
accounts, investments and other assets demonstrate a level of financial responsibility
on the part of the borrower.
Collateral - ANSWER - Something of value that can be pledged as security for
repayment of the loan. In a residential transaction, the property being purchased is used
as security for the debt. The sufficiency of collateral is determined through an appraisal
of the property.
Discount Points - ANSWER - Are pre-paid interest. A fee charged by the lender at
settlement that results in increasing the lender's effective yield on the money borrowed.
One discount point equals one percent of the loan amount. The lower the rate offered
the borrower, the higher the charge for discount points. A loan offered to the borrower at
a higher rate may result in reduced fees because it will be sold to investors at a
premium.
Mortgage Rates - ANSWER - Are affected by events in the global financial market.
Actions taken by the Federal Reserve have a fairly immediate effect on short-term rates,
but their impact on mortgage rates is generally less direct.
Mortgage Banker - ANSWER - A person or firm that originates, sells and then services
mortgage loans. Generally a person, corporation or firm, not otherwise in banking, that
provides its own funds for mortgage financing as opposed to savings and loan
associations or commercial banks that use other people's money (depositors) to
originate mortgage loans.
Mortgage Broker - ANSWER - A person who, for a fee, brings borrowers and lenders
together but does not service the loans that have been arranged. Mortgage brokers
provided consumers with assistance securing hard-to-place or niche sources of
mortgage money. They were the link between the borrower/customer and the
client/lender. Commercial loans have long been the preferred function of the mortgage
broker.
Correspondent Lender - ANSWER - Someone who processes, underwrites, closes and
funds their files in their name. Once the loan is closed, the loan is sold to another lender
,with which the correspondent lender has a business relationship. Correspondent
lenders are usually small lenders who have the necessary funds (through a warehouse
line of credit) to extend loans at their own risk. After a loan is closed, a correspondent
lender will usually sell it to a larger wholesale lender.
Closing - ANSWER - The consummation of a real estate transaction in which all
appropriate documents are signed and the proceeds of the mortgage loan are disbursed
by the lender.
Loan Processing - ANSWER - The process of collecting information about a borrower in
order to build a loan file that will be used to make an underwriting decision.
Underwriting - ANSWER - The process of evaluating a borrower's loan application to
determine the risk involved for the lender.
Funding - ANSWER - The process of transferring funds to a title or escrow company for
disbursement.
Servicing - ANSWER - Sending monthly payment statements and collecting monthly
payments, maintaining payment records and following up on delinquencies.
Origination - ANSWER - The process of creating a new mortgage loan.
Benefits of Home Ownership - ANSWER - • Occupancy - the owner occupies the
residence
• Tax benefits - mortgage interest and property taxes may be tax deductible
• Pride of ownership - many homeowners see the home as a sign of accomplishment
• Security - home ownership protects the individual or family from future increases in
rental rates
• Investment - properties are purchased and held in anticipation of income, appreciation
or both
An Agent's Role in Mortgage Lending Includes: - ANSWER - • arranging for the pre-
qualification/pre-approval of buyers
• discussing general mortgage loan programs that buyers might consider
• answering finance and closing-related questions
• providing buyers with a list of potential lenders
• preparing the contract with all terms of sale, including financing conditions
• tracking important dates from contract to close, including monitoring the time the buyer
has to obtain financing approval
Conventional Loans - ANSWER - Refers to a loan made with real estate as security and
which does not involve government participation in the form of insuring or guaranteeing
the loan.
, Government Loans - ANSWER - Mortgages insured or guaranteed by the US
Government. Includes FHA, VA, and USDA loans.
Four C's of Good Lending - ANSWER - • Character
• Capacity
• Capital
• Collateral
Principle of Supply and Demand - ANSWER - When the demand for real estate is great
and the supply is short, prices in the marketplace go up. Likewise, when the supply is
high and demand is low, prices decline.
Factors Restricting Supply - ANSWER - • Land costs
• Construction (labor and material) costs.
• Taxation
• Economics
• Local government building codes and zoning ordinances
Factors Driving Demand - ANSWER - • Growth in employment
• Transportation systems
• Personal preference
• The availability of credit
• Federal government policy
National Factors Affecting Real Estate Value - ANSWER - • Federal government tax
policy.
• The supply of money has an impact on economic cycles and real estate values.
• The monetary policies of the Federal Reserve affect the availability of funds and
interest rates.
• Interest rates are affected by a number of factors that impact real estate.
Tax Benefits of Home Ownership - ANSWER - • Deductibility of mortgage interest
payments
• Deductibility of real property taxes
• Exemptions from capital gains taxation on the sale of primary residence.
Tax Free Capital Gain Limit - ANSWER - $250,000 for an individual or if you're married
and filing separately. $500,000 for a couple. The home must have been the primary
residence for 2 of the last 5 years.
Local Factors Affecting Real Estate Value - ANSWER - • Availability of employment.
• Population trends affect economic activity.
• The availability of a trained labor force has an impact on economic cycles.
• Local government policy affects economic cycles.
Demographic Shifts Affect: - ANSWER - • Labor markets and retirement
(2025) || Questions & Answers (Graded A+)
Character - ANSWER - A measure of the willingness of a borrower to make on-time
payments. Credit character is revealed in the borrower's credit report.
Capacity - ANSWER - A measure of the willingness of a borrower to make on-time
payments. Credit character is revealed in the borrower's credit report.
Capital - ANSWER - The sum of all assets that the borrower has accumulated. Saving
accounts, investments and other assets demonstrate a level of financial responsibility
on the part of the borrower.
Collateral - ANSWER - Something of value that can be pledged as security for
repayment of the loan. In a residential transaction, the property being purchased is used
as security for the debt. The sufficiency of collateral is determined through an appraisal
of the property.
Discount Points - ANSWER - Are pre-paid interest. A fee charged by the lender at
settlement that results in increasing the lender's effective yield on the money borrowed.
One discount point equals one percent of the loan amount. The lower the rate offered
the borrower, the higher the charge for discount points. A loan offered to the borrower at
a higher rate may result in reduced fees because it will be sold to investors at a
premium.
Mortgage Rates - ANSWER - Are affected by events in the global financial market.
Actions taken by the Federal Reserve have a fairly immediate effect on short-term rates,
but their impact on mortgage rates is generally less direct.
Mortgage Banker - ANSWER - A person or firm that originates, sells and then services
mortgage loans. Generally a person, corporation or firm, not otherwise in banking, that
provides its own funds for mortgage financing as opposed to savings and loan
associations or commercial banks that use other people's money (depositors) to
originate mortgage loans.
Mortgage Broker - ANSWER - A person who, for a fee, brings borrowers and lenders
together but does not service the loans that have been arranged. Mortgage brokers
provided consumers with assistance securing hard-to-place or niche sources of
mortgage money. They were the link between the borrower/customer and the
client/lender. Commercial loans have long been the preferred function of the mortgage
broker.
Correspondent Lender - ANSWER - Someone who processes, underwrites, closes and
funds their files in their name. Once the loan is closed, the loan is sold to another lender
,with which the correspondent lender has a business relationship. Correspondent
lenders are usually small lenders who have the necessary funds (through a warehouse
line of credit) to extend loans at their own risk. After a loan is closed, a correspondent
lender will usually sell it to a larger wholesale lender.
Closing - ANSWER - The consummation of a real estate transaction in which all
appropriate documents are signed and the proceeds of the mortgage loan are disbursed
by the lender.
Loan Processing - ANSWER - The process of collecting information about a borrower in
order to build a loan file that will be used to make an underwriting decision.
Underwriting - ANSWER - The process of evaluating a borrower's loan application to
determine the risk involved for the lender.
Funding - ANSWER - The process of transferring funds to a title or escrow company for
disbursement.
Servicing - ANSWER - Sending monthly payment statements and collecting monthly
payments, maintaining payment records and following up on delinquencies.
Origination - ANSWER - The process of creating a new mortgage loan.
Benefits of Home Ownership - ANSWER - • Occupancy - the owner occupies the
residence
• Tax benefits - mortgage interest and property taxes may be tax deductible
• Pride of ownership - many homeowners see the home as a sign of accomplishment
• Security - home ownership protects the individual or family from future increases in
rental rates
• Investment - properties are purchased and held in anticipation of income, appreciation
or both
An Agent's Role in Mortgage Lending Includes: - ANSWER - • arranging for the pre-
qualification/pre-approval of buyers
• discussing general mortgage loan programs that buyers might consider
• answering finance and closing-related questions
• providing buyers with a list of potential lenders
• preparing the contract with all terms of sale, including financing conditions
• tracking important dates from contract to close, including monitoring the time the buyer
has to obtain financing approval
Conventional Loans - ANSWER - Refers to a loan made with real estate as security and
which does not involve government participation in the form of insuring or guaranteeing
the loan.
, Government Loans - ANSWER - Mortgages insured or guaranteed by the US
Government. Includes FHA, VA, and USDA loans.
Four C's of Good Lending - ANSWER - • Character
• Capacity
• Capital
• Collateral
Principle of Supply and Demand - ANSWER - When the demand for real estate is great
and the supply is short, prices in the marketplace go up. Likewise, when the supply is
high and demand is low, prices decline.
Factors Restricting Supply - ANSWER - • Land costs
• Construction (labor and material) costs.
• Taxation
• Economics
• Local government building codes and zoning ordinances
Factors Driving Demand - ANSWER - • Growth in employment
• Transportation systems
• Personal preference
• The availability of credit
• Federal government policy
National Factors Affecting Real Estate Value - ANSWER - • Federal government tax
policy.
• The supply of money has an impact on economic cycles and real estate values.
• The monetary policies of the Federal Reserve affect the availability of funds and
interest rates.
• Interest rates are affected by a number of factors that impact real estate.
Tax Benefits of Home Ownership - ANSWER - • Deductibility of mortgage interest
payments
• Deductibility of real property taxes
• Exemptions from capital gains taxation on the sale of primary residence.
Tax Free Capital Gain Limit - ANSWER - $250,000 for an individual or if you're married
and filing separately. $500,000 for a couple. The home must have been the primary
residence for 2 of the last 5 years.
Local Factors Affecting Real Estate Value - ANSWER - • Availability of employment.
• Population trends affect economic activity.
• The availability of a trained labor force has an impact on economic cycles.
• Local government policy affects economic cycles.
Demographic Shifts Affect: - ANSWER - • Labor markets and retirement
